RESERVE FOR LOSSES AND LOSS EXPENSES

The reserve for losses and loss expenses consists of the following:



	March 31, 2016		December 31, 2015
Outstanding loss reserves	$	1,710.3	$	1,678.5
Reserves for losses incurred but not reported	4,864.8		4,777.7
Reserve for losses and loss expenses	$	6,575.1	$	6,456.2

The table below is a reconciliation of the beginning and ending liability for unpaid losses and loss expenses. Losses incurred and paid are reflected net of reinsurance recoverables.



	Three Months Ended March 31,
	2016			2015
Gross liability at beginning of period	$	6,456.2		$	5,881.2
Reinsurance recoverable at beginning of period	(1,480.0		)	(1,340.3		)
Net liability at beginning of period	4,976.2			4,540.9
Net losses incurred related to:
Current year	397.8			388.8
Prior years	(25.4		)	(63.6		)
Total incurred	372.4			325.2
Net paid losses related to:
Current year	6.7			6.6
Prior years	282.5			293.1
Total paid	289.2			299.7
Foreign exchange revaluation and other	3.7			(11.6		)
Net liability at end of period	5,063.1			4,554.8
Reinsurance recoverable at end of period	1,512.0			1,350.3
Gross liability at end of period	$	6,575.1		$	5,905.1

For the three months ended March 31, 2016, the Company recorded net favorable prior year reserve development in each of its operating segments primarily due to actual loss emergence being lower than initially expected. The net favorable prior year reserve development in the North American Insurance segment was primarily related to the professional liability and programs lines of business, partially offset by net unfavorable prior year reserve development in the casualty line of business. The net favorable reserve development in the Global Markets Insurance segment was primarily related to the other specialty line of business partially offset by unfavorable reserve development in the professional liability and casualty lines of business. The net favorable prior year reserve development in the Reinsurance segment was primarily related to the property reinsurance and specialty reinsurance lines of business partially offset by net unfavorable prior year reserve development in the casualty reinsurance line of business.

For the three months ended March 31, 2015, the Company recorded net favorable prior year reserve development in each of its operating segments due to actual loss emergence being lower than initially expected. The net favorable prior year reserve development in the North American Insurance segment was primarily related to the professional liability and general casualty lines of business, partially offset by net unfavorable prior year reserve development in the healthcare line of business. The Global Markets Insurance segment had favorable prior year reserve development across most major lines of business. The net favorable prior year reserve development in the Reinsurance segment was primarily related to the property reinsurance and casualty reinsurance lines of business partially offset by unfavorable reserve development in the specialty line of business.

While the Company has experienced favorable reserve development in its insurance and reinsurance lines, there is no assurance that conditions and trends that have affected the development of liabilities in the past will continue. It is not appropriate to extrapolate future redundancies based on prior years’ development. The methodology of estimating loss reserves is periodically reviewed to ensure that the key assumptions used in the actuarial models continue to be appropriate.